Marketing Company Can’t Force Consumer to Arbitrate Claims When it Didn’t Disclose it was the Contracting Party in the Form On-Line Arbitration Provision

While the law has struggled to catch up with the swift progression of technology in recent years, particularly the increase in internet use, many companies have taken advantage of the ease of acquiring consumers’ information. It is easier than ever for companies to gain access to an individual’s credit card information. Many companies make deals with each other to share this information, despite the fact that such agreements are illegal.

Many laws, though, remain relevant regardless of whether the transaction took place online or in person. This was demonstrated in one recent class action lawsuit against an online marketing company. The named plaintiffs filed their class action lawsuit against a company which performs background checks. The plaintiffs noticed that regular monthly charges appeared on their credit card for a report which they allege they did not intend to buy. The company performing the background checks said that the consumers were misled into purchasing the subscription of the online marketing company. As a result, the marketing company was added as a third defendant.
The background check company provided space on its website for the marketing company and used a “data pass” method of sharing credit card information which is now illegal. The marketing company used that shared information to enroll customers in free trial subscription offers which were then converted into a monthly billed subscription.

The marketing company moved to force the lawsuit into arbitration.
The district court ruled that the consumers had entered into a contract with the marketing company, but the court denied the motion to force arbitration.

The plaintiffs appealed and the case went to the Ninth Circuit Court of Appeals. The appellate court noted that, under Washington law, a contract requires mutual assent to its essential terms in order to be considered legally binding. Those essential terms include the names of the parties involved in the contract. The appellate court found that the web page which the consumers used to buy the subscription service did not sufficiently identify the marketing company as the party making the contract with the consumers. The appellate court also remained skeptical as to whether providing an email address and clicking a “yes” button is sufficient to agree to a contract. Such clicks are still new enough that many courts don’t quite know how to handle them.
The appellate court also denied the marketing company’s motion to force the case into arbitration. The court decided that, since the arbitration provision was on another hyperlink which the consumers did not click on, no valid arbitration agreement took place.

Arbitration agreements have grown increasingly popular with companies in recent years. Consumers and employees alike are both being asked to sign more and more contracts containing arbitration agreements. These agreements tend to favor the company over the individual as they make class actions impossible and the arbitrator is often chosen and paid for by the company. The higher courts have upheld many arbitration agreements in recent years, but not all of the appellate courts have been as favorable to the agreements. Many have been found to be unenforceable and the likelihood of such a finding can only increase if the consumer never even saw the arbitration agreement.

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